DRAFT RED HERRING PROSPECTUS Dated September 27, 2010 (Please read Section 60B of the Companies Act, 1956) The Draft Red Herring Prospectus will be updated upon filing with the RoC Book Building Issue

L&T FINANCE HOLDINGS LIMITEDOur Company was originally incorporated as L&T Capital Holdings Limited in Mumbai under the Companies Act, 1956, as amended, on May 1, 2008 as a public limited company. For further details regarding changes made to the name of our Company, please refer to the section titled "History and Certain Corporate Matters" on page 199 of this Draft Red Herring Prospectus. Registered Office: L&T House, Ballard Estate, Mumbai 400 001. Tel: (91 22) 6752 5656; Fax: (91 22) 6752 5858 Corporate Office: 'The Metropolitan', 8th Floor, C-26/27, E-Block, Bandra-Kurla Complex, Bandra (E), Mumbai 400 051. Tel: (91 22) 6737 2951; Fax: (91 22) 6737 2900 Website: www.ltfinanceholdings.com Promoter of the Company: Larsen & Toubro Limited Company Secretary and Compliance Officer: Mr. N. Suryanarayanan; Tel: (91 22) 4249 1300 / (91 22) 4249 1400; Fax: (91 22) 4249 1384; Email: ltfh-ipo@ltfinance.com PUBLIC ISSUE OF UP TO [] EQUITY SHARES OF RS. 10 EACH ("EQUITY SHARES") FOR CASH BY L&T FINANCE HOLDINGS LIMITED (THE "COMPANY" OR THE "ISSUER") AT A PRICE OF RS. [] PER EQUITY SHARE AGGREGATING UP TO RS. 15,000 MILLION (THE "ISSUE") INCLUDING RESERVATION OF UP TO [] EQUITY SHARES FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES FOR CASH AT A PRICE OF RS. [] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [] PER EQUITY SHARE) AGGREGATING UP TO RS. 250 MILLION (THE "EMPLOYEE RESERVATION PORTION"). THE ISSUE WILL CONSTITUTE APPROXIMATELY []% OF THE POST- ISSUE SHARE CAPITAL OF OUR COMPANY AND THE NET ISSUE WILL CONSTITUTE APPROXIMATELY []% OF THE POST-ISSUE SHARE CAPITAL OF OUR COMPANY. THE FACE VALUE OF THE EQUITY SHARES IS RS. 10 EACH AND THE ISSUE PRICE IS [] TIMES THE FACE VALUE. THE PRICE BAND AND THE MINIMUM BID SIZE WILL BE DECIDED BY THE COMPANY IN CONSULTATION WITH THE JOINT GLOBAL COORDINATORS AND BOOK RUNNING LEAD MANAGERS, THE BOOK RUNNING LEAD MANAGERS AND THE CO-BOOK RUNNING LEAD MANAGER AND ADVERTISED BY THE COMPANY AT LEAST TWO (2) WORKING DAYS PRIOR TO THE BID/ISSUE OPENING DATE. In case of revision in the Price Band, the Bidding / Issue Period will be extended for at least three additional Working Days after such revision of the Price Band subject to the Bidding/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the National Stock Exchange of India Limited (the "NSE") and the Bombay Stock Exchange Limited (the "BSE"), by issuing a press release, and also by indicating the change on the website of the Joint Global Coordinators and Book Running Lead Managers ("JGCBRLMs"), of the Book Running Lead Managers ("BRLMs") and the Co-Book Running Lead Manager ("CBRLM" and together with the JGCBRLMs and the BRLMs, the Lead Managers) and at the terminals of the Syndicate Members. In terms of Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended (the "SCRR"), and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the "SEBI ICDR Regulations"), this is an issue for less than 25% of the post-Issue capital, subject to the Net Issue being more than 10% of the post Issue capital. Pursuant to Regulations 43(2) read with Regulation 26(2) of the SEBI ICDR Regulations at least 50% of the Net Issue shall be allotted on a proportionate basis to Qualified Institutional Buyers ("QIBs"), provided that the Company may allocate up to 30% of the QIB Portion to Anchor Investors on a discretionary basis out of which one-third shall be reserved for domestic Mutual Funds only. In the event of undersubscription in the Anchor Investor Portion, the remaining Equity Shares shall be added to the Net QIB Portion. 5% of the Net QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the Net QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Net Issue shall be available for allocation on a proportionate basis to NonInstitutional Bidders and not less than 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders subject to valid Bids being received at or above the Issue Price. If at least 50% of the Net Issue cannot be Allotted to QIBs, then the entire application money shall be refunded forthwith. All potential investors may participate in this Issue through the Application Supported by Blocked Amount ("ASBA") process by providing details about the bank accounts in which corresponding bid amounts may be blocked by the Self Certified Syndicate Banks ("SCSBs"). For details, please refer to the section titled "Issue Procedure" on page 288 of this Draft Red Herring Prospectus. RISKS IN RELATION TO FIRST ISSUE This being the first public issue of the Equity Shares, there has been no formal market for the Equity Shares. The face value of the Equity Shares is Rs. 10 each and the Issue Price is [] times the face value. The Issue Price (as determined and justified by the Company and the Lead Managers as stated in the section titled "Basis for Issue Price" on page 106 of this Draft Red Herring Prospectus) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their entire investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Company and the Issue including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India ("SEBI"), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled "Risk Factors" on page 20 of this Draft Red Herring Prospectus. ISSUER'S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Company and the Issue that is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions, misleading in any material respect. IPO GRADING This Issue has been graded by [] and has been assigned the "[]" indicating [], in its letter dated []. The Issue grading is assigned on a five point scale from 1 to 5 with "IPO Grade 5" indicating strong fundamentals and "IPO Grade 1" indicating poor fundamentals. For more information on the Issue grading, please refer to the section titled "General Information" on page 82 of this Draft Red Herring Prospectus. LISTING The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the NSE and the BSE. The Company received the in-principle approval from the NSE and the BSE for the listing of the Equity Shares pursuant to letters dated [] and [], respectively. For the purposes of this Issue, the [] shall be the Designated Stock Exchange. JOINT GLOBAL COORDINATORS AND BOOK RUNNING LEAD MANAGERS

JM Financial Consultants Private Limited 141 Maker Chambers III Nariman Point Mumbai 400 021, India Tel: (91 22) 6630 3030 Fax: (91 22) 2204 2137 Email: ltf.ipo@jmfinancial.in Investor Grievance Email: grievance.ibd@jmfinancial.in Website: www.jmfinancial.in Contact Person: Ms. Lakshmi Lakshmanan SEBI Registration No.: INM000010361

Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar Nariman Point Mumbai 400 021, India Tel: (91 22) 6631 9999 Fax: (91 22) 3919 7845 E-mail: ltfinance.ipo@citi.com Investor Grievance Email: investors.cgmib@citi.com Website: http://www.online.citibank.co.in/rhtm/citigroupglobalscreen1.htm Contact Person: Mr. Varun Chokhani SEBI Registration No. INM000010718

HSBC Securities and Capital Markets (India) Private Limited 52/60 Mahatma Gandhi Road Fort, Mumbai 400 001, India Tel: (91 22) 2268 1284 Fax: (91 22) 2263 1984 Email: ltfinance@hsbc.co.in Investor Grievance Email: investorgrievance@hsbc.co.in Website: http://www.hsbc.co.in/1/2/corporate/equities-globalinvestment-banking Contact Person: Mr. Sumit Roy SEBI Registration No.: INM000010353 REGISTRAR TO THE ISSUE

BOOK RUNNING LEAD MANAGERS

CO-BOOK RUNNING LEAD MANAGER

Barclays Securities (India) Private Limited 208 Ceejay House Shivsagar Estate Dr. A. Besant Road, Worli Mumbai 400 018, India Tel: (91 22) 6719 6075 Fax: (91 22) 6719 6097 Email: ltf.ipo@barclayscapital.com Investor Grievance Email: BSIPL.Concerns@barclayscapital.com Website: http://www.barclayswealth.com/indiaofferdocuments.htm Contact Person: Mr. Vishal Bohra SEBI Registration No.: INM000011195

Credit Suisse Securities (India) Private Limited 9th floor, Ceejay House Shivsagar Estate Dr. A Besant Road, Worli Mumbai 400 018, India Tel: (91 22) 6777 3777 Fax: (91 22) 6777 3820 Email: list.project-gn1@credit-suisse.com Investor Grievance Email: list.igcellmerbnkg@credit-suisse.com Website: https://www.credit-suisse.com/in/ipo/ Contact person: Ms. Deepa Jadhav SEBI Registration number: INM000011161

Equirus Capital Private Limited 4th Floor, A Wing, Fortune 2000, Bandra Kurla Complex, Bandra (E) Mumbai 400 051, India Tel: (91 22) 2653 0600 Fax: (91 22) 2653 0601 Email: ltf.ipo@equirus.com Investor Grievance Email: investorsgrievance@equirus.com Website : www.equirus.com Contact Person : Mr. Munish Aggarwal SEBI Registration No. : INM000011286

Sharepro Services (India) Private Limited 13 A B, Samhita Warehousing Complex 2nd floor, Sakinaka Telephone Exchange Lane Andheri - Kurla Road Sakinaka, Andheri (E), Mumbai 400 072 Tel: (91 22) 6772 0306 / 6772 0308/6772 0420/6772 0422 Fax: (91 22) 28591568 Email: kumaresh@shareproservices.com Investor Grievance Email: ipoltfh@shareproservices.com Website: www.shareproservices.com Contact Person: Mr. V. Kumaresan Compliance Officer: Mr. V. Kumaresan SEBI Registration No.: INR000001476

ISSUE PROGRAMME* BID/ISSUE OPENS ON [], 2010 BID/ ISSUE CLOSES ON [], 2010*** The Company may in consultation with the Lead Managers consider participation by Anchor Investors. The Anchor Investor Bidding Date shall be one day prior to the Bid/Issue Opening Date. ** The Company may in consultation with the Lead Managers consider closing the Bidding/Issue Period for QIBs one day prior to the Bid/Issue Closing Date.

CONTENTS Page SECTION I: GENERAL ............................................................................................................................. 1 DEFINITIONS AND ABBREVIATIONS .................................................................................................. 1 CERTAIN CONVENTIONS - PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ......................................................................................................................................................... 14 FORWARD-LOOKING STATEMENTS .................................................................................................. 16 SECTION II: RISK FACTORS ................................................................................................................ 17 SECTION III: INTRODUCTION ............................................................................................................. 45 SUMMARY OF OUR INDUSTRY ........................................................................................................... 45 SUMMARY OF OUR BUSINESS, STRENGTHS AND STRATEGIES ................................................. 49 THE ISSUE ................................................................................................................................................ 57 SUMMARY FINANCIAL INFORMATION ............................................................................................ 58 GENERAL INFORMATION .................................................................................................................... 74 CAPITAL STRUCTURE ........................................................................................................................... 84 OBJECTS OF THE ISSUE ........................................................................................................................ 93 BASIS FOR ISSUE PRICE........................................................................................................................ 95 STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS .................................................................................................................................... 97 SECTION IV: ABOUT US ..................................................................................................................... 106 INDUSTRY OVERVIEW........................................................................................................................ 106 OUR BUSINESS ...................................................................................................................................... 123 REGULATIONS AND POLICIES IN INDIA ......................................................................................... 170 HISTORY AND CERTAIN CORPORATE MATTERS ......................................................................... 180 OUR MANAGEMENT ............................................................................................................................ 188 OUR PROMOTER ................................................................................................................................... 198 GROUP COMPANIES ............................................................................................................................ 201 DIVIDEND POLICY ............................................................................................................................... 216 SECTION V: FINANCIAL INFORMATION ........................................................................................ F-1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................................................................................................................................... 217 FINANCIAL INDEBTEDNESS .............................................................................................................. 247 SECTION VI: LEGAL AND OTHER INFORMATION ....................................................................... 254 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS .............................................. 254 GOVERNMENT AND OTHER APPROVALS ...................................................................................... 312 OTHER REGULATORY AND STATUTORY DISCLOSURES ........................................................... 317 SECTION VII: ISSUE INFORMATION ................................................................................................ 329 TERMS OF THE ISSUE .......................................................................................................................... 329 ISSUE STRUCTURE ............................................................................................................................... 332 ISSUE PROCEDURE .............................................................................................................................. 336 SECTION VIII: MAIN PROVISIONS OF OUR ARTICLES OF ASSOCIATION .............................. 370 SECTION IX: OTHER INFORMATION ............................................................................................... 380 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION................................................. 380 DECLARATION...................................................................................................................................... 382 APPENDIX A: IPO GRADING REPORT ............................................................................................. 383

-i-

SECTION I: GENERAL DEFINITIONS AND ABBREVIATIONS Unless the context otherwise implies or requires, the terms and abbreviations stated hereunder shall have the meanings as assigned therewith. References to statutes, rules, regulations, guidelines and policies will be deemed to include all amendments and modifications notified thereto. Conventional and general terms Term "Act" or "Companies Act" ALM Guidelines Depositories Act Depository DP/Depository Participant ESOP Guidelines FDI Policy FEMA Regulations Description The Companies Act, 1956, as amended. Guidelines for Asset Liability Management System in relation to NBFCs prescribed by the RBI. Depositories Act, 1996, as amended. A depository registered with SEBI under the SEBI (Depositories and Participants) Regulations, 1996, as amended. A depository participant as defined under the Depositories Act. Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The foreign direct investment policy prescribed by the Department of Industrial Policy and Promotion, Government of India. The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended, notified by the RBI, in exercise of its power under the FEMA. The five year plans issued by the Planning Commission, Government of India Generally accepted accounting principles in India. The Indian Income Tax Act, 1961. The Prevention of Money Laundering Act, 2002. The Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, as amended, issued by the Government of India under PMLA. The Non Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, as amended, issued by RBI. Regulation S under the Securities Act. Securities Contracts (Regulation) Rules, 1957, as amended. Securities and Exchange Board of India Act 1992, as amended. Securities and Exchange Board of India (Foreign Institutional Investors) Regulations 1995, as amended. Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended. The United States Securities Act of 1933, as amended.

Five Year Plan Indian GAAP IT Act/Income Tax Act PMLA PML Rules

Prudential Norms Directions

Regulations S SCRR SEBI Act SEBI FII Regulations SEBI ICDR Regulations Securities Act/U.S. Securities

1

Act SICA US/USA/United States US GAAP VCFs 1993 Regulations 2002 Act Issue related terms Term Allotment/Allot/Allotted Allottee Anchor Investor Anchor Investor Bid Anchor Investor Bidding Date Description The allotment of the Equity Shares to the successful Bidders pursuant to the Issue. The successful Bidder to whom the Equity Shares are Allotted. A Qualified Institutional Buyer who applies under the Anchor Investor Portion with a minimum Bid of Rs. 100 million. Bid made by the Anchor Investor. The date one day prior to the Bid/Issue Opening Date, prior to and after which the Syndicate will not accept any Bids from Anchor Investors. Anchor Investors are not permitted to withdraw their Bids after the Anchor Investor Bidding Date. Note or advice or intimation of allocation of Equity Shares (including any revision thereof) sent to Anchor Investors who have been allocated Equity Shares on the Anchor Investor Bidding Date. The price at which the Equity Shares are allotted to the Anchor Investors under the Anchor Investor Portion in terms of the Red Herring Prospectus and the Prospectus, which price will be equal to or higher than the Issue Price but not higher than the Cap Price. The Anchor Investor Issue Price will be determined by the Company, in consultation with the Lead Managers. Up to 30% of the QIB Portion, equal to a maximum of [] Equity Shares which may be allocated by the Company to Anchor Investors on a discretionary basis, and out of which [] Equity Shares shall be reserved for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the price at which allocation is made to other Anchor Investors. An application, whether physical or electronic, used by all ASBA Bidders to make a Bid and which authorizes an SCSB to block the Bid Amount in a specified bank account maintained with such SCSB. A bank account maintained with an SCSB wherein a Bid Amount is blocked pursuant to submission of an ASBA Bid cum Application Form by an ASBA Bidder. Any Bidder intending to apply through ASBA by way of the ASBA BCAF in accordance with the terms of the Red Herring Prospectus. The application form, whether physical or electronic, used by an ASBA Bidder to make a Bid, which will be considered as the application for Allotment for the purposes of the Red Herring Prospectus and the Sick Industrial Companies (Special Provisions) Act, 1985, as amended. United States of America including its territories and possessions, any state of the United States of America and the District of Columbia. Generally accepted accounting principles in the USA. Venture capital funds as registered with SEBI under the SEBI (Venture Capital Funds) Regulations, 1996, as amended. The SEBI (Mutual Funds) Regulations, 1996, as amended The UTI (Transfer of Undertaking and Repeal) Act, 2002, as amended

Anchor Investor Confirmation of Allocation Note Anchor Investor Issue Price

Anchor Investor Portion

ASBA/Application Supported by Blocked Amount ASBA Account

ASBA Bidder ASBA Bid cum Application Form/ASBA BCAF

2

Term Prospectus. ASBA Revision Form

Description

The form used by the ASBA Bidders to modify the number of Equity Shares or the Bid Amount in their ASBA Bid cum Application Forms or any prior ASBA Revision Form(s). []. Barclays Securities (India) Private Limited. The basis on which the Equity Shares will be Allotted to Bidders under the Issue and which is described in "Issue Procedure Basis of Allotment" on page 554 of this Draft Red Herring Prospectus. An indication to make an offer during the Bidding/Issue Period by a Bidder, or on the Anchor Investor Bidding Date by an Anchor Investor, pursuant to submission of a Bid cum Application Form to subscribe to the Equity Shares at a price within the Price Band, including all revisions and modifications thereto. The date after which the Syndicate and the SCSBs, will not accept any Bids for the Issue, which shall be notified in widely circulated English and Hindi national newspapers and a Marathi newspaper of wide circulation in the place where the Registered Office is situated, and in case of any revision of such date, the extended Bid/Issue Closing Date, which shall be notified on the websites and terminals of each of the Syndicate and the SCSBs as required under the SEBI ICDR Regulations. The Company may consider closing the Bidding/Issue Period for QIBs one day prior to the Bid/Issue Closing Date. Except in relation to Anchor Investors, the date on which the Syndicate and the SCSBs shall start accepting Bids for the Issue, which shall be the date notified in widely circulated English and Hindi national newspapers and a Marathi newspaper of wide circulation in the place where the Registered Office is situated. In relation to each Bid, shall mean the value of the Bid multiplied by the number of Equity Shares bid for by a Bidder and indicated in the Bid cum Application Form or the ASBA Bid cum Application Form and, in the case of Retail Individual Bidders bidding at Cut-off Price, the Cut-off Price multiplied by the number of Equity Shares bid for by such Retail Individual Bidder and mentioned in the ASBA Bid cum Application Form or the Bid cum Application Form. The highest value of the optional Bids shall be payable by the Bidder upon submission of the Bid. The form used by a Bidder (including the ASBA BCAF) to make a Bid and which will be considered an application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus. Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus. The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date (inclusive of both days) and during which prospective Bidders (excluding Anchor Investors) can submit their Bids, including any revisions thereof. Centre established by the Escrow Collection Banks for acceptance of the Bid cum Application Form. Book building process as provided in Schedule XI of the SEBI ICDR Regulations. The book running lead managers to the Issue, being Barclays and Credit

Bankers to the Issue Barclays Basis of Allotment

Bid

Bid/Issue Closing Date

Bid/Issue Opening Date

Bid Amount

Bid cum Application Form

Bidder Bidding/Issue Period

Bidding Centre Book Building Process/Method BRLMs/Book Running Lead

3

Term Managers Cap Price Suisse.

Description

The higher end of the Price Band, above which the Issue Price and the Anchor Investor Issue Price will not be finalised and above which no Bids will be accepted. The co-book running lead manager to the Issue, being Equirus. Citigroup Global Markets India Private Limited. Notice of Allotment of Equity Shares sent to the Bidders who have been Allotted Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, and in the case of Anchor Investors, shall mean the notice of Allotment of Equity Shares sent to the Anchor Investors who have been Allotted Equity Shares at the Anchor Investor Issue Price. Such branches of the SCSBs which coordinate Bids under this Issue by the ASBA Bidders with the Lead Managers, the Registrar to the Issue and the Stock Exchanges and a list of which is available at http://www.sebi.gov.in. Credit Suisse Securities (India) Private Limited. The Issue Price finalised by our Company in consultation with the Lead Managers which shall be any price within the Price Band. Only Retail Individual Bidders and Eligible Employees are entitled to Bid at the Cutoff Price. The demographic details including address, Bidders bank account details, MICR code and occupation that will be obtained by the Registrar to the Issue from the Depository on the basis of the Depository Participant's identification number, client identification number and PAN provided by them in the Bid cum Application Form Branches of the SCSBs which can collect ASBA Bid cum Application Forms from the ASBA Bidders, a list of which is available at http://www.sebi.gov.in. The date on which funds are transferred from the Escrow Accounts to the Public Issue Accounts or the Refund Account, as appropriate, or the amount blocked by the SCSB is transferred from the bank account of the ASBA Bidders to the Public Issue Account, as the case may be. []. This draft red herring prospectus dated September 27, 2010 filed with SEBI and which does not contain complete particulars of the price at which the Equity Shares are offered. Permanent and full-time employees of our Company, our Promoter, L&T Finance and its subsidiaries, and L&T Infra or a Director of our Company, our Promoter, L&T Finance and L&T Infra (excluding such other persons not eligible under applicable laws, rules, regulations and guidelines) as at the Issue Opening Date and continues to be in the employment of our Company or our Promoter or L&T Finance or L&T Infra, as the case may be, until submission of the Bid cum Application Form or the ASBA Bid cum Application Form, as the case may be. An employee of our Company, our Promoter, L&T Finance and its subsidiaries, and L&T Infra who is recruited against a regular vacancy, but is on probation, as on the date of submission of the Bid cum Application Form or the ASBA Bid cum Application Form, as the case

CBRLM / Co-Book Running Lead Manager Citi Confirmation of Allotment Notice/CAN

Controlling Branches

Credit Suisse Cut-off Price

Demographic Details

Designated Branches

Designated Date

Designated Stock Exchange Draft Red Herring Prospectus

Eligible Employees

4

Term

Description may be, will also be deemed to be a 'permanent employee' of our Company or our Promoter or L&T Finance and L&T Infra, as the case may be.

Eligible NRIs

NRIs from jurisdictions outside India where it is not unlawful to make an issue or invitation under the Issue and in relation to whom the Red Herring Prospectus constitutes an invitation to subscribe to the Equity Shares offered thereby. Reservation of up to [] Equity Shares of Rs. 10 each aggregating up to Rs. 250 million in favor of Eligible Employees. Equirus Capital Private Limited. Accounts opened with the Escrow Collection Bank(s) for the Issue and in whose favor the Bidders (excluding the ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount when submitting a Bid. The agreement dated [], 2010 entered into by our Company, the Registrar to the Issue, the Lead Managers, the Syndicate Members and the Escrow Collection Bank(s) for collection of the Bid Amounts and where applicable, remitting refunds of the amounts collected, to the Bidders (excluding the ASBA Bidders) on the terms and conditions thereof. The banks which are clearing members and registered with SEBI as Bankers to the Issue with whom the Escrow Account will be opened, comprising []. The Bidder whose name appears first in the Bid cum Application Form or Revision Form or the ASBA BCAF. The lower end of the Price Band, below which the Issue Price will not be finalised and below which no Bids will be accepted. General index registration number. HSBC Securities and Capital Markets (India) Private Limited. An offer of specified securities by an unlisted issuer to the public for subscription and includes an offer for sale of specified securities to the public by any existing holders of such securities in an unlisted issuer []. Public issue of up to [] Equity Shares of Rs. 10 each for cash at a price of Rs. [] per Equity Share (including a share premium of Rs. [] per Equity Share) aggregating up to Rs. 15,000 million. The Issue comprises the Net Issue and the Employee Reservation Portion. The agreement entered into on September 23, 2010 among the Company and the Lead Managers pursuant to which certain arrangements are agreed to in relation to the Issue. The final price at which the Equity Shares will be Allotted in the Issue, which will be decided by our Company, in consultation with the Lead Managers, on the Pricing Date. The joint global coordinators and the book running lead managers to the Issue, being JM Financial, Citi and HSBC. JM Financial Consultants Private Limited.

Employee Reservation Portion Equirus Escrow Accounts

Escrow Agreement

Escrow Collection Bank(s)

First Bidder Floor Price GIR Number HSBC Initial Public Offering

IPO Grading Agency Issue

Issue Agreement

Issue Price

JGCBRLMs/Joint Global Coordinators and Book Running Lead Managers JM Financial

5

Term Lead Managers Monitoring Agency Mutual Funds Mutual Fund Portion NECS Net Issue Net Proceeds Net QIB Portion Non-Institutional Bidders Non-Institutional Portion

Description The JGCBRLMs, the BRLMs and the CBRLM. []. Mutual funds registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended. 5% of the Net QIB Portion or at least [] Equity Shares available for allocation to Mutual Funds from the QIB Portion. National Electronic Clearing System. The Issue less the Employee Reservation Portion. Rs. [] million. The QIB Portion less the number of the Equity Shares allocated to the Anchor Investors. All Bidders that are not QIBs or Retail Individual Bidders and who have Bid for the Equity Shares for an amount greater than Rs. 100,000. The portion of the Net Issue being not less than 15% of the Net Issue consisting of [] Equity Shares available for allocation to Non Institutional Bidders, subject to valid Bids received at or above the Issue Price. The price band with a minimum price (Floor Price) of Rs. [] per Equity Share and the maximum price (Cap Price) of Rs. [] per Equity Share. The Price Band and the Minimum Bid Size for the Issue will be decided by the Company in consultation with the Lead Managers, and advertised in an English national newspaper and a Hindi national newspaper, each with wide circulation, and a Marathi newspaper of wide circulation in the place where our Registered Office is situated, two Working Days prior to the Bid / Issue Opening Date, including revisions thereof. The date on which our Company, in consultation with the Lead Managers, finalises the Issue Price. The prospectus to be filed with the RoC in accordance with Section 60 of the Companies Act, containing, inter alia, the Issue Price as determined at the end of the Book Building Process, the size of the Issue and certain other information. An account opened with the Public Issue Account Bank to receive monies from the Escrow Accounts and from the bank accounts of the ASBA Bidders, maintained with SCSBs, on the Designated Date. The bank(s) which are clearing members and registered with SEBI under the SEBI (Bankers to an Issue) Regulations, 1994 with whom the Public Issue Account (s) will be opened and in this case being []. The term "Qualified Institutional Buyers" or "QIBs" shall have the meaning ascribed to such term under the SEBI ICDR Regulations and shall mean and include (i) a Mutual Fund, VCF and FVCI registered with the SEBI; (ii) an FII and sub-account (other than a sub-account which is a foreign corporate or foreign individual), registered with the SEBI; (iii) a public financial institution as defined in Section 4A of the Companies Act; (iv) a scheduled commercial bank; (v) a multilateral and bilateral development financial institution; (vi) a state industrial development corporation; (vii) an insurance company registered with the Insurance Regulatory and Development Authority; (viii) a provident fund with minimum corpus of Rs. 250.00 million; (ix) a pension fund with minimum corpus of Rs. 250.00 million; (x) National Investment Fund set

Price Band

Pricing Date Prospectus

Public Issue Account

Public Issue Account Bank(s)

Qualified Institutional Buyers or QIBs

6

Term

Description up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India; and (xi) insurance funds set up and managed by the army, navy or air force of the Union of India.

QIB Bid/Issue Closing Date

Except in relation to Anchor Investors, the date being either the Bid/ Issue Closing Date or one day prior to the Bid/Issue Closing Date after which the Syndicate and the SCSBs will not accept any Bids from QIBs for this Issue, which shall be notified in an English national newspaper, a Hindi national newspaper and a Marathi newspaper, each with wide circulation, and in case of any revision of such date, the extended QIB Bid/Issue Closing Date, which shall be notified on the websites and terminals of each of the Syndicate and the SCSBs as required under the SEBI ICDR Regulations. The portion of the Net Issue (including the Anchor Investor Portion) amounting to at least 50% of the Net Issue to be Allotted to QIBs on a proportionate basis including the Anchor Investor Portion. The red herring prospectus dated [], 2010 issued in accordance with Section 60B of the Companies Act and the SEBI ICDR Regulations, which does not contain complete particulars of the price at which the Equity Shares are offered. The account(s) opened with the Refund Banker(s), from which refunds, if any, of the whole or part of the Bid Amount to Bidders shall be made to Bidders (excluding ASBA Bidders). [] Sharepro Services (India) Private Limited. Individual Bidders (including HUFs and Eligible NRIs) who have Bid for the Equity Shares of an aggregate amount of Rs. 100,000 or less. The portion of the Net Issue being not less than 35% of the Net Issue consisting of [] Equity Shares available for allocation to Retail Individual Bidders. The form used by Bidders to modify the quantity of the Equity Shares or the Bid Amount in any of their Bid cum Application Forms or any previous Revision Form(s). Bank registered with SEBI under the SEBI (Bankers to an Issue) Regulations, 1994 and which offers ASBA services, a list of which is available at http://www.sebi.gov.in. The BSE and the NSE. The Lead Managers and the Syndicate Members. The agreement dated [], 2010 among members of the Syndicate, the Registrar to the Issue and our Company in relation to the collection of Bids in this Issue (excluding Bids from ASBA Bidders). [] The SEBI (Substantial Acquisition of Shares and Regulations, 1997, as amended. Takeovers)

QIB Portion

Red Herring Prospectus

Refund Account(s)

Refund Banker(s) Registrar to the Issue Retail Individual Bidder(s) Retail Portion

Revision Form

Self Certified Syndicate Bank(s)/SCSB(s) Stock Exchanges Syndicate Syndicate Agreement

Syndicate Members Takeover Code TRS/Transaction Registration Slip

The slip or document issued by any of the members of the Syndicate or the SCSB, as the case may be, to any Bidder as proof of registration of such Bidder's Bid.

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Term Underwriters Underwriting Agreement Working Day

Description The Lead Managers and the Syndicate Members. The agreement dated [], 2010 entered into among the Underwriters and our Company. Any day other than Saturday or Sunday on which commercial banks in Mumbai are open for business, provided however, for the purposes of the time period between Bid Closing Date and listing, "Working Days" shall mean all days other than Sundays and bank holidays, in accordance with the SEBI circular dated April 22, 2010.

Company related terms Term "L&TFH", "L&T Finance Holdings" "the Company", "our Company" and "Issuer" Articles/Articles of Association Audit Committee Auditors Board/Board of Directors CAM Corporate Finance Group Corporate Office DCAM DCTL Director(s) Equity Shares ESOP Scheme Finance ALCO Finance PLR Group Companies Description Refers to L&T Finance Holdings Limited, a company incorporated under the Companies Act and having its registered office at L&T House, Ballard Estate, Mumbai 400 001. The articles of association of our Company, as amended. The audit committee of the Company. The statutory auditors of the Company, M/s. Sharp & Tannan, Chartered Accountants. The board of directors of our Company as constituted from time to time, including any committees thereof. Credit approval memorandum. The Company's corporate finance business conducted by L&T Finance Limited. The Metropolitan, 8th Floor, C-26/27, E-Block, Bandra-Kurla Complex, Bandra (E), Mumbai 400 051. DBS Cholamandalam Asset Management Limited. DBS Cholamandalam Trustees Limited. Director(s) on the Board as appointed from time to time. Equity shares of the Company of face value of Rs. 10 each. The employee stock option scheme adopted by the Board of Directors on September 25, 2010, subject to necessary shareholders approval. The Retail and Corporate Finance Groups' Asset-Liability Management Committee. The prime lending rate devised by the Finance ALCO. Companies, firms, ventures promoted by our Promoter and set out in the section titled "Group Companies" on page 221 of this Draft Red Herring Prospectus. India Infrastructure Developers Limited. The Infrastructure Finance Group's Asset-Liability Management Committee. The Infrastructure Finance Group's Asset-Liability Management Policy.

IIDL Infrastructure ALCO Infrastructure ALM Policy

8

Term Infrastructure Finance Group Infrastructure ICC Investment Management Group IPO Committee L&T L&T Finance / LTF L&T Group L&T Infotech L&T Infra L&T MFTL L&T MHI Turbine L&T Oman L&TIM Memorandum/Memorandum of Association Nabha Nomination, Compensation & Remuneration Committee Promoter/our Promoter Promoter Group

Description The Company's infrastructure finance business conducted by L&T Infrastructure Finance Company Limited. The Infrastructure Finance Group's Investment and Credit Committee. The Company's investment management business conducted by L&T Investment Management Limited. IPO committee of the Company. Larsen and Toubro Limited. L&T Finance Limited. All entities mentioned in the section titled "Group Companies" of this Draft Red Herring Prospectus. Larsen & Toubro Infotech Limited. L&T Infrastructure Finance Company Limited. L&T Mutual Fund Trustee Limited. L&TMHI Turbine Generators Private Limited. Larsen and Toubro (Oman) LLC. L&T Investment Management Limited. The memorandum of association of our Company, as amended. Nabha Power Limited. The nomination, compensation and remuneration committee of the Company. The promoter of our Company is Larsen & Toubro Limited. The promoter group of our Company refers to the entities / persons related to the Promoter as per the definition of "promoter group" in Regulation 2 (zb) of the SEBI ICDR Regulations. The Reserve Bank of India. Reserve Bank of India Act, 1934. L&T House, Ballard Estate, Mumbai 400 001. The Company's retail finance business conducted by L&T Finance Limited. A committee of the Board constituted in accordance with the provisions of the Listing Agreement. The subsidiaries of our Company listed in the section titled "History and Certain Corporate Matters" on page 199 of this Draft Red Herring Prospectus. TAMCO Switchgear (Malaysia) SDN BHD. Unless the context otherwise requires, means the Company and its Subsidiaries.

RBI RBI Act Registered Office Retail Finance Group Shareholders'/Investors' Grievance Committee Subsidiary/Subsidiaries

TAMCO Malaysia "We", "us", "our"

9

Industry related terms Term AFC AMC ARC CICs CICs-ND-SI IFCs NBFC NBFCs-D NBFC-ND NBFC-ND-SI Abbreviations Term AGM ALM ALCO AMFI ARMFA ASSOCHAM AUM BG BOT BSE BFS BTU CAGR CAR CARE CDSL CFO CII CRAR Annual General Meeting. Asset Liability Management. Asset Liability Committee. Association of Mutual Funds in India. AMFI registered Mutual Fund Advisors The Associated Chambers of Commerce and Industry. Assets under management. Bank Guarantee. Build-Operate Transfer. The Bombay Stock Exchange Limited. The Board for Financial Supervision British Thermal Units. Compounded Annual Growth Rate. Capital Adequacy Ratio. Credit Analysis & Research Limited. Central Depository Services (India) Limited. Chief Financial Officer. Confederation of Indian Industry. Capital to Risk (Weighted) Average Ratio. Description Asset Finance Company. Asset Management Company. Asset Reconstruction Company. Core Investment Companies. Systemically Important Core Investment Companies Infrastructure Finance Companies. 'Non-Banking Financial Company' as defined under Section 45-I(f) of the RBI Act, 1934. Deposit taking NBFCs. Non-deposit taking NBFC. Systemically important non-deposit taking NBFC. Description

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Term CRISIL EGM EPS ERP FDI FEMA FICCI FII(s) CRISIL Limited. Extraordinary General Meeting.

Description

Earnings Per Share (as calculated in accordance with AS-20). Enterprise Resource Planning. Foreign Direct Investment. The Foreign Exchange Management Act, 1999, and the related rules and regulations framed thereunder. Federation of Indian Chambers of Commerce and Industry. Foreign Institutional Investors as defined under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, registered with the SEBI under applicable laws in India. Foreign Investment Promotion Board, Ministry of Finance, Government of India. Period of twelve months ending on March 31 of that particular year, unless otherwise stated. Fitch Ratings India Private Limited. First Time Users. Foreign Venture Capital Investors, as defined and registered with SEBI under the SEBI (Foreign Venture Capital Investors) Regulations, 2000, as amended. Gross Domestic Product. Government of India. Giga Watt. Hindu Undivided Family. ICRA Limited. International Financial Reporting Standards. International Monetary Fund. Initial Public Offer. Insurance Regulatory Development Authority. Information Technology. Joint Liability Group. Kisan Gaurav Seva Kendra. Know Your Customer. Letters of Credit. Life Insurance Corporation of India. Microfinance Institutions. Mutual Funds.

FIPB Financial Year/Fiscal/Fiscal Year FITCH FTUs FVCI GDP GoI/Government GW HUF ICRA IFRS IMF IPO IRDA IT JLG KGSK KYC LC LIC MFIs MFs

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Term MICR MIS MMSCMD MMT Mn/mn N.A. NAV

Description Magnetic Ink Character Recognition. Management Information System. Million Metric Standard Cubic Meter Per Day. Million Metric Tons. Million. Not applicable. Net Asset Value being paid up equity share capital plus free reserves (excluding reserves created out of revaluation) less deferred expenditure not written off (including miscellaneous expenses not written off) and debit balance of profit & loss account, divided by weighted average number of issued equity shares. Non-Convertible Debentures. National Electronic Fund Transfer. Net Owned Fund. Non-Performing Assets. Non Resident External Account. Non Resident Indian is a person resident outside India, as defined under FEMA and who is a citizen of India or a person of Indian origin as defined under the Foreign Exchange Management (Deposit) Regulations, 2000. Non Resident Ordinary Account. National Securities Depository Limited. The National Stock Exchange of India Limited. A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. Price/Earnings Ratio. Permanent Account Number allotted under the I.T. Act. Perpetual Debt Instruments. Purchasing Power Parity. GDP adjusted for inflation/deflation. Registrar of Companies, Maharashtra, situated at Everest, 100 Marine Drive, Mumbai 400 002. Return On Net Worth. Indian Rupee(s). Real Time Gross Settlement.

NCD NEFT NOF NPA NRE Account NRI

NRO Account NSDL NSE OCB/Overseas Corporate Body

P/E Ratio PAN PDI PPP Real GDP RoC/ROC RONW Re. /Rs./Rupee(s) RTGS

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Term SEBI SEZs SHGs SPV SRTOs STOs T&D TRS USD or U.S. Dollar or $ or US $ WPI

Description The Securities and Exchange Board of India, constituted under the SEBI Act, 1992. Special Economic Zones. Self Help Groups. Special Purpose Vehicle. Small Road Transport Operators. Small Truck Owners. Transmission and Distribution Transaction Registration Slip. United States Dollar. Wholesale Price Index.

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CERTAIN CONVENTIONS - PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA Financial Data Unless indicated otherwise, the financial data and other financial information included in this Draft Red Herring Prospectus are derived from the restated standalone and consolidated financial statements of the Company prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with the SEBI ICDR Regulations. The fiscal year of the Company commences on April 1 each year and ends on March 31 of the following year. Accordingly, unless the context otherwise implies or requires, all references to a particular fiscal year are to the twelve-month period ended March 31 of that year. There are significant differences between Indian GAAP, IFRS and U.S. GAAP. Accordingly, the degree to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information to a reader, is entirely dependent on the reader's level of familiarity with Indian accounting practices, Indian GAAP, the Companies Act and the SEBI ICDR Regulations. Any reliance by persons not familiar with Indian accounting practices, Indian GAAP, the Companies Act and the SEBI ICDR Regulations on the financial statements and other financial information presented in this Draft Red Herring Prospectus should accordingly be limited. The Company has not attempted to quantify any such differences or their impact on the financial statements and other financial information included herein, and we urge you to consult your own advisors regarding such differences and their impact on the financial statements and other financial information included herein. For more information on the results of operations and financial condition of the Company, refer to the section titled "Financial Statements" on page 239 of this Draft Red Herring Prospectus. Industry and Market Data Unless stated otherwise, industry and market data used throughout this Draft Red Herring Prospectus has been obtained from industry publications and certain public sources. Industry publications generally state that the information contained in such publications have been obtained from sources believed to be reliable, but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although the Company believes that the industry and market data used in this Draft Red Herring Prospectus is reliable, such data has not been independently verified by the Company. Further, the extent to which the market and industry data presented in this Draft Red Herring Prospectus is meaningful depends on the reader's familiarity with and understanding of methodologies used in compiling such data. Presentation of Currency This Draft Red Herring Prospectus contains translations of certain U.S. Dollar and other currency amounts into Indian Rupees that have been presented solely to comply with the requirements of Clause 2(VIII)(G) of Part A of Schedule VIII of the SEBI ICDR Regulations. These convenience translations should not be construed as a representation that those U.S. Dollar or other currency amounts could have been, or can be, converted into Indian Rupees, at any particular rate, at the rates stated to below or at all. In this Draft Red Herring Prospectus, all references to "India" are to the Republic of India, all references to "Rupees" or "Rs." are to Indian Rupees, the official currency of the Republic of India and all references to "US$", "U.S. Dollar(s)" or "USD" are to United States Dollars, the official currency of the United States of America. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. Exchange Rates The U.S. Dollar exchange rate data for the last 5 years from www.rbi.org.in is as given below: 1 USD = Rs. 44.61 as on March 31, 2006 1 USD = Rs. 43.59 as on March 31, 2007 1 USD = Rs. 39.97 as on March 31, 2008 1 USD = Rs. 50.95 as on March 31, 2009

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1 USD = Rs. 45.14 as on March 31, 2010

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FORWARD-LOOKING STATEMENTS This Draft Red Herring Prospectus contains certain "forward-looking statements". These forward-looking statements generally can be identified by words or phrases such as "aim", "anticipate", "believe", "expect", "estimate", "intend", "objective", "future", "goal", "plan", "contemplate", "propose", "seek to", "project", "should", "will", "will continue", "will pursue", "will likely result" or other words or phrases of similar import. All forward-looking statements are based on our current plans and expectations and are subject to a number of uncertainties and risks and assumptions that could significantly and materially affect our current plans and expectations and our future financial condition and results of operations. Important factors that could cause actual results, including our financial condition and results of operations to differ materially from our expectations include, but are not limited to, the following: General economic and business environment in India; Our ability to successfully implement our strategy and growth plans; Our ability to compete effectively and access funds at competitive cost; Effectiveness and accuracy of internal controls and procedures; Changes in domestic or international interest rates and liquidity conditions; Defaults by customers resulting in an increase in the level of non-performing assets in our portfolio; Rate of growth of our loan assets and ability to maintain concomitant level of capital; Downward revision in credit ratings; Potential mergers, acquisitions or restructurings and increased competition; Change in tax benefits and incentives and other applicable regulations, including various tax laws; Our ability to retain our management team and skilled personnel; Change in laws and regulations that apply to NBFCs in India, including laws that impact lending rates and our ability to enforce security; and Change in political conditions in India.

For further discussion of factors that could cause our actual results to differ, please refer to the sections titled "Risk Factors", "Our Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 20, 137 and 169, respectively, of this Draft Red Herring Prospectus. Neither our Company, its Directors and officers, any Underwriter, nor any of their respective affiliates or associates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges for the Equity Shares allotted pursuant to the Issue.

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SECTION II: RISK FACTORS An investment in our equity shares involves a high degree of risk. You should carefully consider all the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity Shares. If any of the following risks, or other risks that are not currently known or are now deemed immaterial, actually occur, our business, results of operations and financial condition could suffer, the trading price of our Equity Shares could decline, and all or part of your investment may be lost. Unless otherwise stated, we are not in a position to specify or quantify the financial or other risks mentioned herein. The numbering of the risk factors has been done to facilitate ease of reading. In this section, any reference to "we", "our" and "us" refers to our Company and our Subsidiaries on a consolidated basis, or to our Infrastructure Finance Group, Retail Finance Group, Corporate Finance Group and Investment Management Group, or the business segments of such respective business groups, as the context will indicate. Any reference herein or elsewhere in this Draft Red Herring Prospectus to profits "as restated" are to profits which have been subjected to adjustments and on account of restatements in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, and any references to items of income or expenditure or extraordinary items or taxes on income are to such items as audited, but without making adjustments and on account of the corresponding restatements in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, if any. Also, any reference herein or elsewhere in this Draft Red Herring Prospectus to a balance as on a reporting date as contained in the Restated Summary Statement of Assets and Liabilities as on that reporting date is to a balance which has been subjected to restatements in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations. INTERNAL RISKS Risks Relating to our Group1.

Certain of the Companys Subsidiaries, Group Companies, Directors and our Promoter are involved in certain legal and other proceedings. Certain of our Companys Subsidiaries, Group Companies, Directors and our Promoter are currently involved in a number of legal proceedings in India. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. If any new developments arise, for example, a change in Indian law or rulings against us by the appellate courts or tribunals, we may face losses and we may have to make provisions in our financial statements, which could increase our expenses and our liabilities. Decisions in such proceedings adverse to our interests may have a material adverse effect on our business, future financial performance and results of operations. Details of legal proceedings against the Company, L&T Finance Limited, L&T Infrastructure Finance Company Limited, L&T Investment Management Limited ("L&TIM") and our Directors are set out below:Sr No. Name of party Cases files by the party Claims No. 1. 2. 3. 4. 5. L&T Finance Holdings Limited ................................................. Director (Mr. Ajit Kumar Jain) ................................................... L&T Finance Limited ................................................................. L&T Infrastructure Finance Company Limited .......................... L&T Investment Management Limited ...................................... Total .......................................................................................... Nil Nil 8,363 10 Nil 8,373 (Rs. in million) Nil Nil 3,888.30 674.03 Nil 4,562.32 No. Nil 1 245 2 1 249 Cases filed against the party Claims (Rs in million.) Nil Nil 24.40 Nil Nil 24.40

A show cause notice dated April 26, 2010 has been issued to L&TIM by SEBI alleging, inter alia, the violation of certain provisions of the SEBI (Mutual Fund) Regulations, 1996 by L&TIM during 2008. Adjudication proceedings were initiated by the SEBI following the issuance of the show cause notice under Rule 4(1) of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 read with Section 15I of the Securities and Exchange Board of India Act, 1992.

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Pursuant to its letter dated June 4, 2010, L&TIM filed a consent application with SEBI. In this regard, L&TIM also held a meeting with the concerned enquiry officer of SEBI on August 26, 2010 where L&TIM proposed to offer Rs. 1,000,000 towards full and final settlement of the matters referred to in its consent application, without admission or denial of guilt, on a no fault basis. A formal letter stating that L&TIM would bear this amount was submitted to SEBI on August 27, 2010. No orders have been passed by SEBI to date in connection therewith. For further details of these legal proceedings, refer to the section titled "Outstanding Litigation and Material Developments" on page 206 of this Draft Red Herring Prospectus.2.

As an NBFC, the risk of default and non-payment by borrowers and other counterparties may materially and adversely affect our profitability and asset quality. Any lending or investment activity is exposed to credit risk arising from the risk of default and non-payment by borrowers and other counterparties. Our total loan portfolio, which combines the loan portfolios of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group, comprises a mix of infrastructure, retail and corporate assets and the gross loan size (excluding inter-corporate deposits) of the portfolio was Rs. 114,459.45 million as of March 31, 2010. The size of our loan portfolio is expected to grow as a result of our expansion strategy in existing as well as new products across our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group. This will continue to expose us to an increasing risk of defaults as our portfolio expands. For our Infrastructure Finance Group, the gross NPAs as a percentage of total outstanding loans were 1.84%, 0% and 0% as of March 31, 2010, 2009 and 2008, respectively, while the net NPAs as a percentage of net outstanding loans were 1.66% as of March 31, 2010. For our Retail and Corporate Finance Groups, the gross NPAs as a percentage of total loans and advances were 2.78%, 2.56% and 1.02% as of March 31, 2010, 2009 and 2008, respectively, while the net NPAs as a percentage of total loans and advances were 1.7%, 2.11% and 0.82% as of March 31, 2010, 2009 and 2008, respectively. For further details, refer to the section titled "Our Business Our Loan Portfolio and Policies Non-Performing Assets" on page 171 of this Draft Red Herring Prospectus. Our loan portfolio consists of loans provided to large corporates, small and medium enterprises and individuals, with the latter segment constituting a significant portion of our portfolio. Relatively large sized single exposures to corporate customers can impact profitability and result in higher NPAs on a small number of defaults. The borrowers and/or guarantors and/or third parties may default in their repayment obligations due to various reasons including insolvency, lack of liquidity, and operational failure. Besides macroeconomic conditions, we face risks specific to each line of our business, which may also result in increased defaults. In particular, the customers of the transportation equipment finance, rural product finance and microfinance segments of our Retail Finance Group may have relatively underdeveloped and unsophisticated banking and financial controls, practices and procedures, and individual borrowers are generally less financially robust than larger corporate borrowers and fleet owners, and, as a result, are likely to be more severely affected by deteriorating economic conditions. In addition, a significant proportion of our Retail Finance Group, the microfinance customer-base, in particular, belongs to the low income group. Further, the owners and/or operators of commercial vehicles financed by us often do not have any credit history supported by tax returns and other related documents which would enable us to assess their creditworthiness, and we may also not receive updated information regarding any change in the financial condition of our customers or may receive inaccurate or incomplete information as a result of any fraudulent misrepresentation on the part of our customers. Furthermore, unlike several developed economies, a nationwide credit bureau has only recently become operational in India, so there is less financial information and related data available on the creditworthiness of individuals, particularly for the proportion of our customer-base who are mainly from the low income group and who typically have limited access to other financing sources. It is therefore difficult to carry out precise credit risk analysis on our customers, although our Retail Finance Group follows certain procedures to evaluate the credit profile of our customers at the time of sanctioning a loan, in deciding whether to extend credit to, or to enter into transactions with, customers and counterparties, we rely on published credit information of such parties and financial and other relevant information furnished by customers, based on which we perform our credit assessment. Refer to the section titled "Our Business Our Loan Portfolio and Policies - Lending Policies" on page 162 of this Draft Red Herring Prospectus for details

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of the credit policies and approval processes of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group. We cannot be certain that our risk management controls will continue to be sufficient or that additional risk management policies for individual borrowers will not be required. Failure to continuously monitor the loan contracts, particularly for individual borrowers, could adversely affect our credit portfolio which could have a material and adverse effect on our business, future financial performance and results of operations. If any of the aforesaid information, as obtained from customers and third parties, is misleading or inaccurate, the procedures that we follow may not be adequate or sufficient to provide accurate data as to the creditworthiness of our customers and counterparties. In the event we do not suitably identify the risk of default, or if we rely on information that may not be true or may be materially misleading, our business, future financial performance and results of operations may be materially and adversely affected. We cannot be certain, and cannot assure you, that we will be able to maintain or improve our collections and recoveries in relation to the NPAs across our Infrastructure Finance Group, Retail Finance Group or Corporate Finance Group, or otherwise adequately control our level of NPAs in future. Moreover, as our loan portfolio matures, we may experience greater defaults in principal and/or interest repayments. Thus, if we are not able to control or reduce our level of NPAs, the overall quality of our loan portfolio may deteriorate and our results of operations may be adversely affected. We have made provisions of Rs. 79.00 million and Rs. 749.65 million in respect of gross NPAs as of March 31, 2010 for our Infrastructure Finance Group and Retail and Corporate Finance Groups, respectively. In addition, our Infrastructure Finance Group maintains a provision against standard assets, as a matter of policy. As of March 31, 2010, we have made provisions in the amount of Rs. 251.60 million in respect of standard assets. There can be no assurance that there will be no further deterioration in our provisioning coverage as a percentage of NPAs or otherwise, or that the percentage of NPAs that we will be able to recover will be similar to our past experience of recoveries of NPAs. In the event of any further deterioration in our NPA portfolio, there could be a more significant and substantial material and adverse impact on our business, future financial performance and results of operations.3.

Our business requires substantial capital, and any disruption in funding sources would have a material and adverse effect on our liquidity and financial condition. The liquidity and ongoing profitability of our business are, in large part, dependent upon our timely access to, and the costs associated with, raising capital. Our funding requirements historically have been met from a combination of shareholder funding, secured and unsecured loan funds, such as Rupee- and US Dollar-denominated term loans from banks and financial institutions, the issuance of redeemable non-convertible debentures and commercial paper and inter-corporate deposits from L&T. For further details, refer to the section titled "Our Business Our Funding Structure" on page 160 of this Draft Red Herring Prospectus. Thus, our business depends and will continue to depend on our ability to access diversified funding sources. Our ability to raise funds on acceptable terms and at competitive rates continues to depend on various factors including our credit ratings, the regulatory environment and policy initiatives in India, developments in the international markets affecting the Indian economy, investors' and/or lenders' perception of demand for debt and equity securities of NBFCs, and our current and future results of operations and financial condition. Our funding strategy was adversely affected by the ongoing crisis in the global credit markets since 2008. Through the second half of 2008 and the first half of 2009, capital and lending markets remained highly volatile and access to liquidity was adversely affected. These conditions resulted in increased borrowing costs and difficulty in accessing funds in a cost-effective manner. Changes in economic and financial conditions or continuing lack of liquidity in the market could make it difficult for us to access funds at competitive rates. As an NBFC, we also face certain restrictions on our ability to raise money from international markets which may further constrain our ability to raise funds at attractive rates. Any disruption in our primary funding sources at competitive costs would have a material adverse effect on our liquidity and financial condition.

4.

We may be exposed to potential losses due to a decline in value of assets secured in our favor, and due to delays in the enforcement of such security upon default by our borrowers. As of March 31, 2010, approximately 87.83% of our total loan portfolio (excluding inter-corporate deposits), which combines the loan portfolios of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group, is secured by a mix of both movable and immovable assets or

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other forms of collateral, depending on the nature of the transaction. The value of certain types of assets may decline due to inherent operational risks, the nature of the asset secured in our favor and adverse market and economic conditions (both global and domestic). For example: for the asset-backed loans of the transportation equipment finance segment of our Retail Finance Group, the vehicles purchased by our customers are hypothecated in our favor as security interests for the financing facilities provided by us. For further details, refer to the section titled "Our Business Our Business and Operations Our Retail Finance Group Transportation Equipment Finance Segment" on page 152 of this Draft Red Herring Prospectus. The value of the vehicle, however, is subject to depreciation, deterioration, and/or reduction in value on account of a number of external factors (such as wear and tear), over the course of time. Consequently, the realizable value of the collateral for the credit facility provided by us, when liquidated, may be lower than the outstanding loan from such customers. Any default in repayment of the outstanding credit obligations by our customers may expose us to losses. Furthermore, in the case of a default, we typically repossess the commercial vehicles financed and sell such vehicles through auctions. The hypothecated vehicles, being movable property, may be difficult to locate or seize in the event of any default by our customers. There can also be no assurance that we will be able to sell such vehicles provided as collateral at prices sufficient to cover the amounts under default; and In the capital markets finance segment of our Corporate Finance Group, our loan portfolio includes assets such as equity shares, offered to us as main security or collateral, as the case may be, the value of which are inherently volatile in nature and may decline in value. For further details, refer to the section titled "Our Business Our Business and Operations Our Corporate Finance Group Capital Markets Finance Segment" on page 157 of this Draft Red Herring Prospectus.

The value of the security or collateral granted in our favor, as the case may be, may also decline due to delays in insolvency, winding-up and foreclosure proceedings, defects in title or documentation relevant to the assets, difficulty in locating movable assets and the necessity of obtaining regulatory approvals/court orders for the enforcement of our collateral over those assets, and as such, we may not be able to recover the estimated value of the assets which would materially and adversely affect our business, future financial performance and results of operations. In the event of default by our borrowers, we cannot guarantee that we will be able to realize the full value of our collateral, due to, among other things, delays on our part in taking immediate action and in bankruptcy foreclosure proceedings, stock market downturns, defects in the perfection of collateral and fraudulent transfers by borrowers. In the event a specialized regulatory agency gains jurisdiction over the borrower, creditor actions can be further delayed.5.

If we are unable to manage our rapid growth effectively, our business, future financial performance and results of operations could be materially and adversely affected. The businesses of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group have grown rapidly during the last two years. From March 31, 2008 to March 31, 2010, the gross loans outstandings of our: Infrastructure Finance Group increased by a CAGR of 52.95%; and Retail and Corporate Finance Groups increased by a CAGR of 25.36%.

We intend to continue to grow the businesses of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group rapidly, which could place significant demands on our operational, credit, financial and other internal risk controls. It may also exert pressure on the adequacy of our capitalization, making management of asset quality increasingly important. Our future business plan is dependent on our ability to borrow to fund our growth. We may have difficulty obtaining funding on attractive terms. Adverse developments in the Indian credit markets, such as the increase in interest rates in March 2010, may significantly increase our debt service costs and the overall cost of our funds. An inability to manage our growth effectively and failure to secure the required funding therefore on favorable terms, or at all, could have a material and adverse effect on our business, future financial performance and results of operations.

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6.

We require certain statutory and regulatory approvals for conducting our business and our failure to obtain, retain or renew them in a timely manner, or at all, may adversely affect our operations. NBFCs in India are subject to strict regulation and supervision by the RBI. We require certain approvals, licenses, registrations and permissions for operating our business, including registration with the RBI as an NBFC-ND. Each of our Company, L&T Finance, L&T Infra and India Infrastructure Developers Limited is registered as an NBFC-ND with the RBI. The RBI has classified L&T Finance as an "asset finance company", and L&T Infra as an "infrastructure finance company". L&TIM has been issued licenses by the SEBI in relation to the business of our Investment Management Group. For the various approvals, licenses, registrations and permissions that we have obtained or applied for our business, refer to the section titled "Government and Other Approvals" on page 264 of this Draft Red Herring Prospectus. Further, such approvals, licenses, registrations and permissions must be maintained/renewed over time, applicable requirements may change and we may not be aware of or comply with all requirements all of the time. Additionally, we may need additional approvals from regulators to introduce new insurance and other fee based products to our customers. In particular, we are required to obtain and maintain a certificate of registration for carrying on business as an NBFC that is subject to numerous conditions. Further, our Company has applied for registration with the RBI as a "core investment company" and an exemption from compliance with the Prudential Norm Directions which will require us to comply with additional requirements, such as maintaining a specified minimum capital ratio and a maximum leverage ratio. For further details, refer to the section titled "Regulations and Policies in India" on page 188 of this Draft Red Herring Prospectus. In addition, our various branches, meeting centers, KGSK centers and customer care centers are required to be registered under the relevant shops and establishments laws of the states in which they are located. The shops and establishment laws regulate various employment conditions, including working hours, holidays and leave and overtime compensation. Some of our branches have not applied for such registration while other branches still have applications for registration pending. Given the extensive regulation of the financial services industry, it is possible that we could be found, by a court, arbitration panel or regulatory authority not to have complied with applicable legal or regulatory requirements. Further, we may be subject to lawsuits or arbitration claims by customers, employees or other third parties in the different state jurisdictions in India in which we conduct our business. If we fail to obtain or retain any of these approvals or licenses, or renewals thereof, in a timely manner, or at all, our business may be adversely affected. If we fail to comply, or a regulator claims we have not complied, with any of these conditions, our certificate of registration may be suspended or cancelled and we shall not be able to carry on such activities. We may also incur substantial costs related to litigation if we are subject to significant legal action, which may materially and adversely affect our business, future financial performance and results of operations. For further details, refer to the section titled "Government and Other Approvals" on page 264 of this Draft Red Herring Prospectus.

7.

We are affected by volatility in interest rates for both our lending and treasury operations, which could cause our net interest income to decline and adversely affect our return on assets and profitability. The businesses of our Infrastructure Finance Group, Retail Finance Group and Corporate Finance Group are dependent on interest income from the loans they disburse. Accordingly, we are affected by volatility in interest rates in our lending operations. Being a non-deposit accepting NBFC, we are exposed to greater interest rate risk compared to banks or deposit-accepting NBFCs. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and other factors. Due to these factors, interest rates in India have historically experienced a relatively high degree of volatility. If interest rates rise we may have greater difficulty in maintaining a low effective cost of funds compared to our competitors which may have access to low-cost deposit funds. Further, in case our borrowings are linked to market rates, we may have to pay interest at a higher rate as compared to other lenders. Fluctuations in interest rates may also adversely affect our treasury operations. In a rising interest rate environment, especially if the rise were sudden or sharp, we could be adversely affected by the decline in the market value of our securities portfolio and other fixed income securities. In addition, the value of any interest rate hedging instruments we may enter into in the future would be affected by changes in interest rates.

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When interest rates decline, we are subject to greater repricing and prepayment risks as borrowers take advantage of the attractive interest rate environment. When assets are repriced, our spread on our loans, which is the difference between our average yield on loans and our average cost of funds, could be affected. During periods of low interest rates and high competition among lenders, borrowers may seek to reduce their borrowing cost by asking lenders to reprice loans. If we reprice loans, our results may be adversely affected in the period in which the repricing occurs. If borrowers prepay loans, the return on our capital may be impaired as any prepayment premium we receive may not fully compensate us for the redeployment of such funds elsewhere. Further, a material proportion of the loans provided by us are long-term in nature and may not have escalation clauses and may be on a fixed rate basis. Any increase in interest rates over the duration of such loans may result in us losing interest income. Our inability to effectively and efficiently manage interest rate variations may adversely affect our business, future financial performance and result of operations.8.

Our success depends in large part upon our management team and skilled personnel and our ability to attract and retain such persons. Our future performance will be affected by the continued service of our management team and skilled personnel. We also face a continuing challenge to recruit and retain a sufficient number of suitably skilled personnel, particularly as we continue to grow. There is significant competition for management and other skilled personnel in the various segments of the financial services industry in which we operate, and it may be difficult to attract and retain the personnel we need in the future. The loss of key personnel may have a material and adverse effect on our business, future financial performance, results of operations and ability to grow in line with our strategy and future plans.

9.

Our business is based on the trust and confidence of our customers; any damage to that trust and confidence may materially and adversely affect our business, future financial performance and results of operations. We are dedicated to earning and maintaining the trust and confidence of our customers; and we believe that the good reputation created thereby, and inherent in the "Larsen & Toubro" brand name is essential to our business. As such, any damage to our reputation, or that of the "Larsen & Toubro" brand name, could substantially impair our ability to maintain or grow our business. In addition, any action on the part of any of the Larsen & Toubro group companies that negatively impact the "Larsen & Toubro" brand could have a material adverse effect on our business, future financial performance and results of operations.

10.

The private infrastructure development industry in India is still at a relatively early stage of development and is linked to the continued growth of the Indian economy, the sectors on which we focus and stable and experienced regulatory regimes. We believe that the further development of India's infrastructure is dependent on formulation and effective implementation of state and central government programs and policies that facilitate and encourage private sector investment in infrastructure projects in India. Many of these programs and policies are developing and evolving and their success will depend on whether they are properly designed to address the issues facing infrastructure development in India and are effectively implemented. Additionally, these programs will need continued support from stable and experienced regulatory regimes that not only encourage the continued movement of private capital into infrastructure development but also lend to increased competition, appropriate allocation of risk, transparency, effective dispute resolution and more efficient and cost-effective services to the end-consumer. The availability of private capital and the continued growth of the infrastructure development industry are also linked to the continued growth of the Indian economy. Many specific factors within each industry sector may also influence the success of the projects within those sectors, including changes in policies, regulatory frameworks and market structures. While there has been progress in sectors such as telecommunications, transportation, energy, tourism and industrial and commercial infrastructure, other sectors such as urban infrastructure and healthcare have not progressed to the same degree. Further, since infrastructure services in India have historically been provided by the central and state governments without charge or at a low charge to consumers, the growth of the infrastructure industry will be impacted by consumers' income levels and the extent to which they would be willing to pay or can be induced to pay for infrastructure services. If the central and state governments' initiatives and regulations in the infrastructure industry do not proceed in the desired direction, or if there is any

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downturn in the macroeconomic environment in India or in specific sectors, our business, future financial performance and results of operations could be materially and adversely affected.11.

The financing industry is becoming increasingly competitive and our growth will depend on our ability to compete effectively and maintain a low effective cost of funds. We face increasing competition from public and private sector Indian commercial banks and from other financial institutions that provide finance products or services. Many of our competitors have greater resources than we do. The competition we face from banks is increasing as more banks are targeting products and services similar to ours. Competition in our industry depends on, among other things, the ongoing evolution of government policies relating to the industry, the entry of new participants into the industry and the extent to which there is consolidation among banks and financial institutions in India. Our ability to compete effectively is primarily dependent on our ability to maintain a low effective cost of funds. Our borrowing costs have been competitive in the past initially due to our strong credit rating, credit history, strong capital adequacy ratios and the L&T brand. (refer to the section titled "Our Business Our Competitive Strengths Good financial and capital position, as well as access to multiple sources of capital" on page 161 of this Draft Red Herring Prospectus) With the growth of our business, we are increasingly dependent on funding from a combination of shareholder funding, secured and unsecured loan funds, such as Rupee- and US Dollar-denominated term loans from banks and financial institutions, the issuance of redeemable non-convertible debentures and commercial paper and inter-corporate deposits (refer to the section titled "Our Business Our Funding Structure" on page 160 of this Draft Red Herring Prospectus). The market for such funds is competitive and our ability to obtain funds on acceptable terms will depend on various factors including our ability to maintain our credit ratings. If we are unable to access funds at an effective cost that is comparable to or lower than that of our competitors, we may not be able to offer competitive interest rates for our loans. Furthermore, we also face significant competition from companies seeking to attract customers' financial assets, including traditional and online brokerage firms, mutual fund companies, other NBFCs, commercial banks and financial institutions who have a broad geographic presence and strong brand names. As we enter new markets in the financial services industry, we are likely to face additional competition from such entities who may be better capitalized, have longer operating histories, have a greater retail and brand presence, and more experienced management in such new markets than we do. If we are unable to compete with these entities effectively in these new markets, this could materially and adversely affect our business, future financial performance and results of operations and it might impede our competitive position and profitability.

12.

Changes in financial market levels have a direct and significant impact on our assets under management; a significant reduction in assets under management has a material adverse effect on our results of operations and business prospects. Performance of financial markets (both domestic and international), global economic conditions, industry trends, interest rates, inflation rates, tax regulation changes and other factors that are difficult to predict affect the mix, market value and level of assets under management. Investment advisory and services fees, the largest component of revenues in our Investment Management Group, are generally calculated as a percentage of the value of assets under management and vary with the type of account managed. Accordingly, fee income generally increases or decreases as assets under management increase or decrease and is affected by market appreciation or depreciation, inflow of new client assets (including purchases of mutual fund shares) and outflow of client assets (including redemption